171,000 Retirees likely to lose TRICARE Prime
option

November 8, 2012

by Tom Philpott

With the presidential election over,
Defense officials are expected to announce soon that military retirees
and their dependents living more than 40 miles from a military treatment
facility or base closure site will lose access to TRICARE Prime, the
military’s managed care option.

These beneficiaries would be expected
to shift to TRICARE Standard, their fee-for-service insurance option,
which would mean an increase in out-of-pocket costs for beneficiaries
who are frequent users of health services.

A total of 171,000 retirees and
dependents are expected to have to shift coverage when remote Prime
networks go away. Tentative plans are for this to occur April 1 in the
West Region, which would coincide with UnitedHealth Military and
Veterans Services taking over the region’s support
contract from TriWest Healthcare Alliance after 16 years.

The North and South TRICARE regions are
expected to close down Prime service areas beyond 40-mile catchment
areas of bases or base closure sites by Oct. 1, 2013, the date when
current Prime enrollment periods expire for most
beneficiaries.

Active duty members and their families
generally would not be impacted. Drilling National Guard members and
reservists living far from military bases could see small increases to
health costs. This would occur if they have been taking advantage of
modest discounts available under TRICARE Reserve Select when network
providers are used. Such discounts would end in areas far from bases if
the Prime option goes away.

Under TRICARE Prime, beneficiaries get
managed care through providers in the network. They pay an annual
enrollment fee of $269.28 for individual coverage or $538.56 for family
coverage. Retirees and family members also are charged co-pays of $12
for each doctor visit.

Under TRICARE Standard, beneficiaries
can choose their own physicians and pay no annual enrollment fee. But
when they need care, retirees must cover 25 percent of allowable
charges. Retirees also have an annual deductible of $150 for the
individual or $300 per family. Total out-of-pocket costs, however, are
capped at $3000 per family.

In most Prime service areas, about half
of eligible retirees already choose to use Standard rather than enroll
in the network.

The end of Prime outside of
40-mile"catchment"areas of military
treatment facilities has been anticipated since 2007, when Defense
officials drafted the third generation of TRICARE support contracts. It
called for returning the managed care option to its original concept of
being a backup network to military clinics and hospitals when they
can’t provide managed care to all beneficiaries living nearby
or in areas where bases have been closed and military health facilities
shuttered.

Through the first two TRICARE
contracts, on the assumption that managed care saved money for the
government, contractors had financial incentive to establish networks
beyond 40-mile catchment areas. In the South Region, for example, the
contractor has offered Prime everywhere. But experience has shown that
providing Prime far from bases can add costs to the system, TRICARE
officials concluded.

Though they wrote the new generation of
support contracts to constrict Prime service areas, health officials
wanted the shift to occur across all regions simultaneously. That
hasn’t been possible until now because of delays in finalizing
contract awards, the result of multiple protests and even a few
reversals of original contract awards.

Contracts for every region are now
settled. Health Net Federal Services has been running the North Region
under the new contract since April 2011. Humana Military Healthcare
Services has operated the South Region under the new contract since
April this year. But all Prime service areas have been maintained with
contract modifications, awaiting final word from Defense that Prime area
restrictions are to be implemented.

The new contracts were drafted during
the Bush administration and are intended to be more comprehensive and
efficient. But sensitive to how a change in Prime eligibility might be
used by politicians this fall, Defense officials ordered plans to end
Prime for retirees living outside catchment areas, including draft
notification letters, shelved until after the election.

Plans for implementation have not
changed, congressional and health sources said. But they also have not
been announced officially yet.

"The Department is considering whether to maintain the
same number of PSAs (Prime service areas) as it has now,"said
Cynthia O. Smith, a spokeswoman for the Department of Defense. Until a
decision is final on reducing PSAs, the department won’t
confirm the number of beneficiaries potentially impacted or the likely
dates for executing the changes.

Some members of Congress already are
concerned. Sen. Dean Heller (R-Nev.) told Dr. Jonathan Woodson,
assistant secretary of defense for health affairs, in recent letter he
was"dismayed"by news reports
that Prime"will be cut for many of the military families and
constituents I represent, not only in Reno but also throughout the
northern part of the state."

Heller said the plan would cause"more
out-of-pocket expenses and longer drive times…I am very
troubled by these changes and am concerned that these alterations are
not being made in a transparent manner. If changes are made, I hope you
will notify those affected immediately."

A spokesman for Heller said Woodson had
not yet answered the letter. Given the nation’s debt crisis
and the budget cuts looming for defense programs, Congress is not
expected to block this long-standing plan to tighten access to Prime and
hold down costs. To do so likely would require lawmakers to find
equivalent budget savings elsewhere.